ESG investing is growing in relevance across the insurance sector with 83% of insurers, led by European insurers, indicating the importance of ESG investment policies to their firms, according to BlackRock's seventh annual global survey.
Yet, despite growing recognition, 70% of insurers reported a lack of in-house expertise to model ESG variables. Additionally, in-depth interviews conducted by BlackRock revealed that even experienced ESG investors struggle at this point to integrate ESG at the overall portfolio level.
BlackRock’s Global Insurance Report was conducted in cooperation with the Economist Intelligence Unit (EIU). It polled 372 senior insurance executives across 27 countries in the insurance and reinsurance sectors, representing estimated assets under management of $7.8 trn,
Ms Kimberly Kim, Head of BlackRock’s Financial Institutions Group in Asia Pacific, said that perhaps the most surprising development is insurers' increased focus on ESG and the challenge of integrating sustainability across the entire portfolio.
While such developments are to be welcomed – with 90% of APAC respondents saying ESG is either extremely or very important – practical obstacles remain in implementing ESG policies. Having access to high quality data, for instance, is one area that can prove challenging and requires an industry-wide response.
Against a backdrop of growing pressure from regulators – coupled with political momentum following the COP21 summit in Paris in 2015 – a strong majority (83%) of insurers indicate that an ESG investment policy is important to their firms. Environmental (climate change) appears to be a factor supporting the shift, with 23% citing environmental risk as key macro risk to their portfolio compared to 6% in 2017.
While ESG’s importance is widely accepted, differing views over how to best integrate ESG considerations into investment processes remain. In fact, there is widespread agreement (90%) that regulators should provide clarity in this area by defining ESG investments on a consistent basis globally.